Budget 2020: What do we know?

With the prospect of a no-deal Brexit looming, Minister for Finance Paschal Donohoe has said he will opt for a more cautious budget than would otherwise have been the case. However, there is still the prospect of a May 2020 general election, so the Government is under pressure to deliver for voters.

Despite the concerns for the economy a number of areas have been identified as likely to be the focus of budget measures. Here are some of the things we can expect.

Help-to-buy

The Government’s help-to-buy scheme looks set to be modified in an effort to ensure those who can already afford a home won’t be subsidised. The Government has been examining lowering the cap on properties which qualify from €500,000 to somewhere between €250,000 and €300,000, which they believe will incentivise developers to build more affordable homes.

Motoring

The taxing of motor vehicles is expected to change quite significantly with new measures due to be announced.

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A new charge on all new petrol and diesel cars, as well as on used imports, is expected to be introduced. A health surcharge which could be linked to nitrogen-oxide and other pollutants is one mooted measure. The options discussed by Department of Finance officials include charges of €5, €7, €7.5 or €10 per mg/km of nitrogen-oxide.

An average new diesel car, with an NOx level of 43mg/km, would face charges via increased VRT of €215, €323 and €430 respectively, while the average new petrol car would face €115, €173 and €230. The charge would likely be significantly higher for used imports.

While there was also a proposal to align diesel and petrol taxes, given that hauliers are in the Brexit firing line this may have to wait a year.

Carbon tax

Car-owners could take a further hit from a carbon tax increase, expected to be increasing between €5 and €10 per tonne.

This isn’t particularly onerous, however. A €10 a tonne rise would add about €1.70 to a 60l petrol fill, €1.96 to a diesel fill, 26 cent to a 12.5kg bale of peat and €1.20 to a 40kg bag of coal. A rise of €5 to €7, which may be the landing zone, would cost even less.

Entrepreneurs

Entrepreneurs will see a couple of measures aimed at helping them in advance of Britain’s departure from the EU.

Among the schemes likely to be improved is KEEP– Key Employee Engagement Programme – introduced in 2017 and designed to remove the need for employees to pay tax on share options in certain cases. Capital gains tax is still charged when the shares are sold.

Another scheme where changes are expected is the EIIS – the Employee and Investment Scheme – the old business expansion scheme incentive under which investors can get relief against income tax for investments of up to €150,000 a year. It is one of the few special income tax reliefs left in the Irish tax code.

Vulnerable business

Additionally, business which are deemed to be “vulnerable but viable” in the wake of a possible no-deal Brexit will be targeted for supports in a new initiative due to be announced in the budget. There are likely to be some direct grant supports and some supports aimed specifically at protecting jobs when employers are forced to put some employees on short-time working.

Income tax

There’s little doubt but that income tax measures in this budget will be limited. However, the Universal Social Charge could well be tweaked to keep those on minimum wage out of the tax net.

The earned income credit for people who are self-employed may also be brought closer into line with the more lucrative PAYE tax credit.

Welfare and pensions

In recent years we’ve gotten used to the addition of €5 a week in welfare increases. The Government has signalled that there is no money for an across-the-board increase this year.

And even though Fianna Fáil has been pushing the idea of a pension increase, other smaller welfare increases are likely, such as an improvement to the home benefits packaging, which includes support for paying gas and electricity bills.

However, there could well be money for targeted increases in the living alone allowance and the qualified child payment.

Health

The Department of Health continues to be a financial problem. The health service is expected to receive a financial bailout of more than €300 million this year to tackle additional anticipated winter pressures.

While the exact scale of the supplementary budget remains to be seen, it is expected to be below €400 million. In 2018, the health service received supplementary funding of more than €600 million.

A series of smaller measures may be forthcoming. These include lower prescription charges for people over the age of 70, more money for home-help hours, an increase in resources for the National Treatment Purchase Fund and confirmation of the expansion of the free healthcare scheme for children up to the age of eight, likely to be introduced from the start of the 2020 school year.

What else is expected?

There has been some speculation of a further rise in commercial property stamp duty, which was pushed up from 2 per cent to 6 per cent in 2018.

Higher cigarette prices are always a likely target.

There has been a fairly well-signalled intention to impose VAT on food supplements and vitamins.

Ireland led the way on the plastic bag tax some years ago and extending this to more plastics has been suggested, though might take some time to introduce.